9.	FAIR VALUE INFORMATION

Fair Value Hierarchy

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The following disclosure provides the fair value information for financial assets and liabilities as of September 30, 2018. The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels (Level 1, Level 2 and Level 3).

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Level 1 – Quoted prices in active markets for identical assets or liabilities in active markets that are accessible at the measurement date.

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Level 2 – Observable inputs other than Level 1, including quoted prices for similar assets and liabilities in active markets, quoted prices in less active markets, or other observable inputs or model derived valuations that can be corroborated by observable market data, either directly or indirectly, for substantially the full term of the financial instrument.

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Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable. These valuation methodologies generally include pricing models, discounted cash flow models, or a determination of fair value that requires significant management judgment or estimation.

There were no transfers in and out of Level 1 and Level 2 during the nine months ended September 30, 2018 and 2017.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The tables below present the balances of assets and liabilities measured at fair value on a recurring basis for the periods presented.


	Carrying Value at September 30, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Description of assets
Investment securities - AFS:
Residential mortgage-backed securities	$	1,532,878	$	-	$	1,532,878	$	-
CMO/REMIC - residential		223,817		-		223,817		-
Municipal bonds		48,739		-		48,739		-
Other securities		797		-		797		-

Total investment securities - AFS		1,806,231		-		1,806,231		-
Interest rate swaps		944		-		944		-

Total assets	$	1,807,175	$	-	$	1,807,175	$	-

Description of liability
Interest rate swaps	$	944	$	-	$	944	$	-

Total liabilities	$	944	$	-	$	944	$	-


	Carrying Value at December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
	(Dollars in thousands)
Description of assets
Investment securities - AFS:
Residential mortgage-backed securities	$	1,750,909	$	-	$	1,750,909	$	-
CMO/REMIC - residential		273,829		-		273,829		-
Municipal bonds		55,496		-		55,496		-
Other securities		751		-		751		-

Total investment securities - AFS		2,080,985		-		2,080,985		-
Interest rate swaps		3,211		-		3,211		-

Total assets	$	2,084,196	$	-	$	2,084,196	$	-

Description of liability
Interest rate swaps	$	3,211	$	-	$	3,211	$	-

Total liabilities	$	3,211	$	-	$	3,211	$	-

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

We may be required to measure certain assets at fair value on a non-recurring basis in accordance with GAAP. These adjustments to fair value usually result from application of lower of cost or fair value accounting or impairment write-downs of individual assets.

For assets measured at fair value on a non-recurring basis that were held on the balance sheet at September 30, 2018 and December 31, 2017, respectively, the following tables provide the level of valuation assumptions used to determine each adjustment and the carrying value of the related assets that had losses during the period.


	Carrying Value at September 30, 2018		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses For the Nine Months Ended September 30, 2018
	(Dollars in thousands)
Description of assets
Impaired loans, excluding PCI loans:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
SBA		-		-		-		-		-
Real estate:
Commercial real estate		-		-		-		-		-
Construction		-		-		-		-		-
SFR mortgage		13		-		-		13		13
Dairy & livestock and agribusiness		-		-		-		-		-
Consumer and other loans		1		-		-		1		1
Other real estate owned		-		-		-		-		-
Asset held-for-sale		-		-		-		-		-

Total assets	$	14	$	-	$	-	$	14	$	14


	Carrying Value at December 31, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total Losses For the Year Ended December 31, 2017
	(Dollars in thousands)
Description of assets
Impaired loans, excluding PCI loans:
Commercial and industrial	$	-	$	-	$	-	$	-	$	-
SBA		-		-		-		-		-
Real estate:
Commercial real estate		-		-		-		-		-
Construction		-		-		-		-		-
SFR mortgage		-		-		-		-		-
Dairy & livestock and agribusiness		-		-		-		-		-
Consumer and other loans		378		-		-		378		74
Other real estate owned		-		-		-		-		-
Asset held-for-sale		-		-		-		-		-

Total assets	$	378	$	-	$	-	$	378	$	74

Fair Value of Financial Instruments

The following disclosure presents estimated fair value of our financial instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required to develop the estimates of fair value. Accordingly, the estimates presented below are not necessarily indicative of the amounts the Company may realize in a current market exchange as of September 30, 2018 and December 31, 2017, respectively. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.


	September 30, 2018
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets
Total cash and cash equivalents	$	194,475	$	194,475	$	-	$	-	$	194,475
Interest-earning balances due from depository institutions		8,812		-		8,723		-		8,723
Investment securities available-for-sale		1,806,231		-		1,806,231		-		1,806,231
Investment securities held-to-maturity		759,029		-		726,755		-		726,755
Total loans, net of allowance for loan losses (1)		7,522,452		-		-		7,218,542		7,218,542
Swaps		944		-		944		-		944
Liabilities
Deposits:
Interest-bearing	$	3,885,672	$	-	$	3,875,171	$	-	$	3,875,171
Borrowings		429,477		-		429,092		-		429,092
Junior subordinated debentures		25,774		-		-		21,218		21,218
Swaps		944		-		944		-		944

(1) The fair value of loans as of September 30, 2018 was measured using an exit price notion.

	December 31, 2017
			Estimated Fair Value
	Carrying Amount		Level 1		Level 2		Level 3		Total
	(Dollars in thousands)
Assets
Total cash and due from banks	$	144,377	$	144,377	$	-	$	-	$	144,377
Interest-earning balances due from depository institutions		17,952		-		17,951		-		17,951
FHLB stock		17,688		-		17,688		-		17,688
Investment securities available-for-sale		2,080,985		-		2,080,985		-		2,080,985
Investment securities held-to-maturity		829,890		-		819,215		-		819,215
Total loans, net of allowance for loan losses		4,771,046		-		-		4,678,402		4,678,402
Swaps		3,211		-		3,211		-		3,211
Liabilities
Deposits:
Noninterest-bearing	$	3,846,436	$	3,846,436	$	-	$	-	$	3,846,436
Interest-bearing		2,700,417		-		2,697,781		-		2,697,781
Borrowings		553,773		-		553,416		-		553,416
Junior subordinated debentures		25,774		-		-		18,070		18,070
Swaps		3,211		-		3,211		-		3,211

The fair value estimates presented herein are based on pertinent information available to management as of September 30, 2018 and December 31, 2017. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and therefore, current estimates of fair value may differ significantly from the amounts presented above.